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Avoiding Wrongful-Sale Lawsuits in Self-Storage: Doing Lien Sales by the Law

By Scott Zucker Comments

Enforcing a lien and selling a tenant’s property in a public sale is one of the most anguishing parts of a self-storage operator's job. It’s also one of the greatest areas where an operator can find himself accused of making a mistake. Even though an error is unintentional, it can still result in a claim by a tenant for a “wrongful sale.” The impending risk is why self-storage operators frequently want to know, “Am I following the lien process correctly?”

The following is a road map to certain issues that apply to lien enforcement in self-storage. When traveling down the path of a lien sale, there’s nothing better than knowing which way you’re going and being prepared for some of the obstacles that may arise along the way.
Understanding Your State Statute

Of course, the first thing operators need to understand is the right to seize and eventually sell tenants’ stored property is given to them under their state law. So not only must they be familiar with the law, they must be up to date on any legislative changes. In the last few years, several states have updated their lien laws and, therefore, altered the way notices are sent to tenants, military service members are protected, sales are advertised and late fees are charged. It’s imperative that facility operators know their current law.

Once operators know the law, they must understand and follow the timeline for lien enforcement. For example, states have different laws regarding when units can be overlocked, when the lien notice is sent, how long the tenant has to cure his default before advertisements are published, how many ads are published, and how long the operator must wait to hold a sale after the ads are published. These requirements are crucial to ensure full compliance with the state law.

But it’s not only the timeline that must be followed. Most state lien laws address what needs to be in the notices, what information needs to be in the advertisements, and even what notices must be posted in the facility office. Again, for a sale to be valid and a wrongful-sale claim avoided, these requirements must be followed.

Tenant Objection to the Sale

During the lien-enforcement process, there’s always the possibility that the tenant will “object” to the lien sale and seek to stop it. Some state lien laws include a mechanism that allows a tenant to object to a sale by written notice to the facility operator, which obligates the operator to file an action in the courts to receive permission to proceed with the sale.

However, contained within the tenant right of objection comes certain other requirements for that tenant, for example, sending proper notice within the appropriate period of time and, in some states, providing a justifiable basis for the objection. Without meeting these requirements, the tenant’s objection can be overruled and the lien process can continue.

Unfortunately, there are many other ways a tenant can stop a sale, including the filing of an injunction with the court or, as is seen on a more frequent basis recently, the filing of a bankruptcy action. Either of these court filings will typically stay the enforcement of the lien sale, pending a resolution through the court to proceed. Unfortunately, that court action can often be time-consuming and expensive, and even if the operator ultimately prevails, much is lost by having to participate in the process.

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